Updates prices ahead of European markets open

By Kevin Buckland

TOKYO, Jan 17 (Reuters) - Asian stocks edged up on Friday, drawing support from unexpectedly strong growth in China's economy at the end of last year, although gains were limited by caution ahead of Donald Trump's inauguration as U.S. president next week.

Japanese equities struggled though, with the Nikkei on course for a third straight losing week, after the yen popped to a one-month high amid rising bets for an imminent Bank of Japan rate hike.

The dollar clawed back some of Thursday's steep declines against major peers, the result of resurgent wagers on a Federal Reserve rate cut by June. Treasury yields also halted their decline, but remained close to the previous session's lows.

China's economy grew 5% last year, matching the government's target, but in a lopsided fashion, with many people complaining of worsening living standards as Beijing struggles to transfer its industrial and export gains to consumers.

"China markets still face structural headwinds as well as tariff risks, and the response to those will be the ultimate driver of long-term returns," said Charu Chanana, chief investment strategist at Saxo.

Mainland Chinese blue chips .CSI300 were up 0.47% as of 0632 GMT, while Hong Kong's Hang Seng .HSI added 0.29%. China's yuan CNH=D3 was flat at 7.3423 per dollar in offshore trading.

Japan's Nikkei .N225 sagged 0.31%, paring earlier losses of more than 1%. The yen JPY=EBS had earlier climbed to the highest since Dec. 19 at 154.98 per dollar then reversed course to last trade about 0.4% lower at 155.69.

MSCI's world index .MIWD00000PUS edged down 0.05%. Its broadest index of Asia-Pacific shares .MIAP00000PUS lost 0.17%.

European stock futures pointed higher though, particularly in Britain where FTSE futures FFIc1 climbed 0.47%. Pan-European STOXX 50 futures STXEc1 edged up 0.04%.

U.S. S&P 500 futures EScv1 gained 0.15%, after the cash index closed down 0.2% overnight. Those small declines came after a 1.8% jump on Wednesday - the biggest daily percentage gain since the post-election rally on Nov. 6 - fuelled by strong bank earnings at the start of the new reporting season.

"Investors are enjoying the re-anchoring of the market narrative to company fundamentals and away from the macro, with earnings season so far proving robust," said Kyle Rodda, senior financial market analyst at Capital.com.

At the same time, declines in the dollar and bond yields come as "fears of sticky or re-accelerating inflation and a prolonged pause or an end to the Fed's cutting cycle eased," he said.

Ten-year U.S. Treasury yields US10YT=RR stood at 4.6148% in the latest session, after sliding to the lowest since Jan. 6 at 4.5880% on Thursday, when Fed Governor Christopher Waller said three or four interest cuts this year are still possible if U.S. economic data weakens.

Ten-year Japanese government bond yields JP10YTN=JBTC eased along with overnight moves in Treasuries, even as comments from BOJ Governor Kazuo Ueda and one of his deputies, Ryozo Himino, this week spurred a rise in bets for a quarter-point hike on Jan. 24 to 78%. They indicated wage growth would likely remain strong this year and Japan was progressing towards durably hitting its inflation target.

Sources told Reuters that following a likely policy tightening, the central bank is set to maintain a pledge to keep pushing up borrowing costs if the economy continues to recover.

The dollar index =USD - which measures the greenback against a basket of six major currencies, including the yen - edged up 0.14% to 109.12, but remains 0.47% lower for the week, threatening to snap six straight weeks of gains.

The euro EUR=EBS eased 0.13% to $1.02875, while the beleaguered sterling GBP=D3 lost 0.21% to $1.2213.

Declines in bond yields supported alternative assets.

Bitcoin BTC= edged as high as $102,050.99 for the first time since Jan. 7.

Gold XAU= stood at $2,712.36, hovering close to Thursday's high of $2,724.55, its strongest in more than a month.

Meanwhile, crude oil headed for a fourth consecutive weekly advance as the latest U.S. sanctions on Russian energy trade hit supply and pushed up spot prices and shipping rates. O/R

Brent crude futures LCOc1 rose 0.44%, to $81.65 per barrel, on course for a 1.9% rise this week. U.S. West Texas Intermediate crude futures CLc1 were up 0.67% to $79.21 a barrel, headed for a 2.76% advance for the week.

(Reporting by Kevin Buckland; Editing by Kim Coghill and Jacqueline Wong)

((sinead.carew@thomsonreuters.com, +13322191897; alun.john@thomsonreuters.com))

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